A California Republican congressman is trying to hold the state government accountable for not picking up the tab on a $20 billion debt that Gov. Gavin Newsom and Democratic lawmakers have so far refused to pay.
Rep. Vince Fong introduced the Creating Accountability in Loan Repayment Act that would force California to repay that debt before spending any certain additional federal funds, such as future flexible funding similar to federal COVID-19 relief.
“Fraud and mismanagement aren’t isolated incidents in Gavin Newsom’s California — they’ve become systemic failures with real consequences,” Fong said in a statement.
Congress has imposed a federal payroll tax increase tied to the state’s unpaid unemployment insurance (UI) debt. That means California employers face a 5.2% payroll tax — nearly nine times as much as those in other states that are debt free, according to the California Business Roundtable.
Republicans have argued that every other state but California has paid down that debt.
“Since we amassed this debt, a bunch of states ran into the same problem and worked up sizable debts to the federal government,” state Sen. Roger Niello (R) told The California Post. “Every single one of those other states fully paid off that debt. California just refused to.”
The debt comes from a COVID-19-era program that helped states finance a surge in claims for unemployment benefits with federal money.
“What was intended to be a lifeline for unemployed workers during the pandemic has now left California with more than $18 billion in unpaid federal unemployment insurance debt,” Fong said. “Rather than using the state’s past $98 billion budget surplus to pay down that debt, Sacramento shifted the burden onto employers through automatic payroll tax hikes.”
His bill, he added, would protect employers from the state’s mismanagement. If the state violates his proposed law, California would have to repay any misused funds.
Niello said the punishing payroll taxes due to the unpaid money will hurt the state’s economy.
“It’s a real problem for the health of the economy, because we have a weak labor market as it is –one of the weakest in the country,” Niello said. “We’re burdening it further by increasing the cost to employers of every employee they hire.”
The California Post reached out to the Newsom administration for comment.
Newsom previously said he had “difficult private conversations on this topic going back years” with state lawmakers and tried to come to an agreement with them during the past budget negotiations when there was budget surpluses.
He said then he’s still working on this issue.
